Alternatives investments is anything you can’t invest in currently through traditional 401ks or the stock market. So anything that falls into stocks, bonds, and cash would not be considered alternative investments.
And many people as they increase their salaries and generate more income, look for other ways besides the stock market to invest. It’s a great way to diversify from the volatility of the markets and to find other avenues to build wealth.
However, as with any investing, be cautious with how much you invest in alternatives. Start off small to limit your risks and diversify your alternative investments just like you would with stocks and bonds.
1. Physical Real Estate
The most common alternative investment is investing in physical properties. The goal being to either rent or flip the properties to generate income. However, it can often be very intimidating and time-consuming to know exactly what you are doing. But many millionaires were made through real estate investing.
2. Real Estate Crowdfunding
Another option for real estate investing is to diversify your money in a crowdfunding platform. These options have become really popular over the years and allow you to invest in properties without the hassle of physically owning or fixing properties.
3. Fine Art
Investing in art has been around for awhile, but can be pretty difficult to get involved with. Originally, you would either need millions to purchase well-known art, take a risk on up and comers and hope they gain traction, or be an accredited investor and pool money into an art fund.
So why should you consider investing in art? Well, art was the top performing asset class of 2018, beating gold, real estate, classic cars, and the S&P 500 according to the Wall Street Journal.
4. Peer-to-Peer Lending
Another alternative investment is peer-to-peer lending, also known as P2P. This investment allows you to loan money to another person. And there are platforms that exist where you can do this and get returns on your money. This includes LendingClub and Prosper.
These platforms directly connects borrowers with investors, no need to go to a bank. Results can vary with average returns in the 4-8% range, pending on the loan types and risks you take. But it could be a good place to test and diversify your investments.
5. Your Own Online Business
Another great alternative investment is starting your own online business. One of the best things you can do is to invest in yourself. Of course, there is no guarantee of your business success. But if you have the entrepreneurial drive, it can pay you dividends for years.
Some low cost online businesses you can start include creating a Shopify e-commerce store, starting a blog, becoming a consultant, freelance writing, etc. Look at what interests you, the current skills you have, and how you can make money in a specific market.
6. Commodities
A commodity is considered an economic good or service. So when it comes to investing in commodities, you’ll be looking at things like precious metals such as gold, silver, platinum.
And other commodities also include crude oil, natural gas, ethanol, corn, soybeans, wheat, cocoa, coffee, sugar, etc. Many of these items can be bought in ETFs in your investing platform, you can physically buy precious metals, etc.
7. Cryptocurrency
Bitcoin, Ripple, Liteocoin, Ethereum, etc. are all digital currency that has swept the media headlines in the last couple of years. Although some of the hype has slowed down, it’s still alive and well. There are no regulations currently and the volatility can be pretty wild, but I actually see this sticking around and improving in the years to come. If you do go this route, invest with caution.
8. Tax Liens
When a property owner fails to pay his or her taxes, the municipality in which the property is located can sell its tax lien — the right to foreclose on a property when the owner has failed to pay taxes.
Investors can buy the liens in an auction, paying the amount of taxes owed in return for the right to collect back that money, plus an interest payment from the property owner. That might sound a little confusing, but there is a lot of good information online about these if they intrigue you.
9. Farmland
You could bucket this in real estate, but it’s a specialty that should be separated. I’ve never personally thought about investing in farmland, but it can be a good alternative investment. Investors can make money from the value of land increasing over time or through rent payments of the property.
10. Jewelry
Investing in jewelry is another option to consider, however this is not an easy choice. You have to know the market and other things to look for when jewelry is involved.
11. Storage Units
Again, you could consider this under the real estate category, but investing in storage units is another alternative investment. For those unsure of real estate and dealing with maintenance, renters, and other headaches, storage units can be a good choice.